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Honda Atlas Cars announced on Friday a price reduction of up to Rs140,000 on two of its City variants on Friday, following a similar move by Indus Motor Company that also reduced price of its Toyota Yaris cars. The new rates will come into effect from March 15.

The City MT1.2L’s new price is Rs4.649 million after a reduction of Rs50,000. Additionally, the company reduced the price of the City CVT 1.2L by Rs140,000, bringing its new price to Rs4.689 million.

Toyota had earlier announced a price reduction for its Yaris sedan lineup, with the decrease ranging from Rs73,000 to Rs133,000.

This move by both companies is a response to the recently-increased 25% sales tax on automobiles priced above Rs4 million.

Muhammad Abrar Polani, research analyst at brokerage house Arif Habib Limited (AHL), stated that Honda’s decision to reduce the price of its City models appears to be in line with Toyota’s strategy, aimed at avoiding the increased sales tax on cars with engine sizes above 1400cc and those priced at Rs4 million and above.

The government’s decision to raise the sales tax on vehicles with engine sizes of 1,400cc and above, as well as those invoiced at above Rs4 million, from 18% to 25%, has had a significant impact on the auto industry.

Initially, the tax increase was intended only for cars with engine sizes of 1400cc and above, while all SUVs, including those below 1400cc, were to remain under the 18% tax rate.

25% sales tax: Pak Suzuki increases price of Swift GLX CVT in Pakistan by Rs304,000

However, SUV manufacturers producing vehicles below 1400cc were unable to avoid the tax increase and apparently pushed for the inclusion of a Rs4 million price cap. This cap resulted in some Toyota, Honda, and Suzuki models being subject to the increased sales tax regime.

Pakistan’s auto sector has been facing challenges due to high-interest rates and increased production costs, leading to higher car prices and a decline in sales. During the first eight months of fiscal year 2023-24, total car sales dropped to 59,699 units, down 41% from the same period last year, when sales were 101,426 units. Sales in fiscal year 2022-23 also experienced a significant decline, plummeting 56% to just 126,879 units.

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